Finance minister Paul Martin has been receiving a crash course recently in Canadian hypocrisy.
If polls, election results, political rhetoric and newspaper editorials are to be believed, Canadians have decided that the country’s $500 billion public debt and $46-billion annual deficit are The Big Issue right now.
So it is up to Martin, in his first budget, to begin to make a dent in that deficit. Canadians apparently demand it.
How to do it?
Reform Party MPs have insisted he should cut spending, not increase taxes. Martin has promised some spending restraint but he also appears to agree with many economists who say a government decision to cut $30 or $40 billion in spending would throw the economy into a deep recession.
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He therefore has told public pre-budget meetings and hinted in the House of Commons that there will be some tax increases as well, in the form of expanding the tax base or closing loopholes.
Billions of dollars in potential government revenue are lost each year through exceptions to the tax laws — writeoffs for this or tax credits for that. It is this pool of potential revenue that the finance minister wants to tap, since everyone seems to agree the deficit must be attacked.
Then, the fun begins. Whose loophole to plug?
“Not mine,” virtually everyone has been telling the minister. Somebody else’s. Tax the rich. Cut off the welfare bums. Get rid of the fat. Leave me alone.
How about the billions of dollars lost through tax breaks given for investment in registered retirement funds or pension plans? No way, says the middle class and all those conservative, anti-deficit types who inhabit banks, economics departments and newspaper editorial boards. The middle and upper class should be able to get a tax break as they plan for their retirement.
Is there room to reduce or eliminate the tax break given for donations to charities or churches? Shouldn’t Canadians who want to support good causes do so without taxpayer subsidy? No way, say charities. Donations will dry up and good causes will suffer.
OK, then. How about reducing business tax breaks like the 80-percent writeoff for entertaining? “Are you crazy,” cry the country’s restaurant lobbyists and hotels. Thousands of jobs would be lost as business declined.
In agriculture, there is the investment tax credit, Income Tax Act provisions that allow on-farm losses to be written off against off-farm income, capital gains tax exemptions and other tax benefits.
Should any of those provisions be touched? No, say the farm and machinery lobbies. They say those tax breaks are necessary to keep the industry viable.
In fact, in its pre-budget consultation with Martin, the Canadian Federation of Agriculture argued that tax benefits should be continued and, in some cases, expanded. There was no suggestion of sector-approved cuts at all.
So it is in virtually every sector. Industry leaders and their political advocates seem to believe the deficit can be cut on someone else’s back.
